The U.S. consumer is dead, the corrupt NWO and our government/business fascist foes killed him.

1:04 pm August 4, 2009

Anonymous wrote:

"It's the economy, stupid!"

1:22 pm August 4, 2009

Harold Chorney wrote:

Trying to figure out how effective the American stimulus package has been at this point in the business cycle is not easy since the money associated with the stimulus only began to be spent in late February and March of this year.The stimulus bill consisted, according to the Bureau of the Budget, of $180 billion of fiscal relief to state and local governments, $308 billion in tax relief, 81 billion in funding health insurance for the unemployed, and 111 billion in infrastructure investments and investments in science. and more than 100 billion in other expenditures. As of this month, August, only a fraction of the stimulus has been spent. Some sources argue that only about 60 billion of the non tax reduction funds have been spent so far. (The Wall Street Journal has an extremely detailed list of all of the 787 billion dollars worth of funding contained in the original 1000 plus page bill bill that was published on Feb 17, 2009. It covers an impressive array of projects, grants and income transfers.It is available on its web site.)

The government has stated that by the end of 2010 it hopes that 70 % of the stimulus will be spent. It is as yet unclear what proportion of the tax cuts have already been put into effect and what proportion of them have, in effect, been received by taxpayers since most taxes are paid over time in payroll deductions. But we can probably assume no more than one third of them have been expended and received by taxpayers.

In terms of the government's budget it projects a decline in corporate tax revenues from 2008 to 2009 of $157.6 billion and a fall in personal tax revenues of 97.7 billion as well as a decline in excise tax revenues of 1 billion for a total of 255.3 billion.A portion of this is accounted for by the tax reductions, the rest by the slump in the economy. According to the American government's on line Recovery.Gov site, it is suggested that, thus far, 191.9 billion dollars of the stimulus has been distributed and made available with about 70 billion already spent.

Now let us look at the GDP numbers and see what is going on in the economy. Lets begin with real GDP in chained 2005 dollars. If we start our analysis with the fourth quarter of 2007 GDP the numbers are as follows: billions of chained 2005 dollars.

Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q2 09

13,391 13,367 13,415 13,325 13,142 12,925 12,892

Source:BEA:U.S.Dept. of Commerce

This data shows that the economy slumped badly from the peak it reached in Q2 2008 by the Q1 2009. The total fall off was 490 billion dollars a decline of 3.7 % including a fall of 183 billion from Q3 08 to Q4 08; and 215 billion from Q4 08 to Q1 09.

However, from the first quarter of 09 to the second quarter 09 when the first of the stimulus money is being spent the fall off is much smaller 33 billion. This, although not proof, is nevertheless suggestive of the stimulus at work.

Let us now analyse the components of this improvement in the rate of decline.

Below is the data for the same period for federal government expenditures F; state and local expenditures, S ; defense expenditures,D; personal consumption expenditures, C; and private investment, I; followed by exports, X and imports ,M. Remember that the GDP =C + I + G +(X-M).

Finally there is a line devoted to changes in private inventories which reveals where some of the disinvestment is taking place; V
.
Billions of 2005 chained dollars (rounded to the nearest billion except for F and V )

Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q2 09

F $ 925.1 943.4 961.3 991.6 10007.3 996.3 10022.4

S $1544 1542 1547 1547 1539 1533 1543

D $622 635 646 675 682 673 694

C $9364 9350 9351 9268 9195 9209 9181

I $2123 2083 2027 1991 1858 1559 1472

X $1624 1623 1670 1655 1568 1435 1409

M $2188 2174 2147 2134 2039 1821 1748

V 10.3 0.6 -37.1 -29.7 -37.4 -113.9 -141.1

Source:BEA:U.S.Department of Commerce

This data shows quite clearly that the collapse in private investment and the dramatic liquidation of inventories is at the heart of the slump. Between the last quarter of 2007 and the second quarter of 2009, investment in the private sector has fallen from 2123 billion to 1472 billion an enormous drop of 651 billion dollars. Inventory liquidation has accounted for 360.6 billion of this decline in investment.

Consumption decline from its peak of 9364 in last Q. of 2007 to its nadir of 9181 in the second Q. of 2009 has also played a major role. This is a drop of 183 billion dollars.

Exports have fallen from their peak of 1670 in the second quarter of 2008 to 1409 in the second quarter of 2009 a collapse of 261 billion. This has been mitigated by the fall in imports from the peak of 2188 in the last quarter of 2007 to the level of 1748 in the second quarter in 2009 a total fall of 440 billion . The decline in the gap between exports and imports has increased the GDP and exported some of the recession to US trading partners like Canada.

Total federal expenditures actually declined in the first quarter of 2009 presumably because of the exhaustion of spending increases under the Bush Presidency and to a small extent by the fall in defense expenditures quarter to quarter. State and local expenditures fell by 14 billion from the second quarter of 08 to the first quarter of 09.

The recession deepened in this first quarter with the largest drop in private investment, a drop of almost 300 billion in private investment. In the second quarter of 2009 this drop has been reduced to 87 billion. In the second quarter the total drop in the GDP is only 33 billion compared to a drop of 217 billion in the first quarter over the fourth of 08.Total consumption fell by 28 billion as compared to a drop of 73 billion in the third quarter of 08 compared to the second quarter. In the first quarter of 09 consumption actually increased.Again these are suggestive numbers that reinforce the idea that the stimulus, both the more moderate Bush stimulus and the major Obama stimulus had a very positive effect upon private investment but much less so on consumption.

So while we can see that the stimulus seems to have had some effect on slowing the rate of fall in the economy, particularly when it is combined with the stimulative monetary policy, the results are still somewhat inconclusive on its overall impact. We need to do further analysis as more data is revealed.

The falling gap between exports and imports has also had an important effect.

The results in the next quarter should tell us much more about the effectiveness of the stimulus. Sorting out the impact of tax cuts as opposed to spending increases as opposed to the inventory depletion turning of the cycle is not going to be easy. But whatever the preferred argument the economy appears to be on the mend.

4:04 pm August 4, 2009

Yousha wrote:

Dow 4900.

4:27 pm August 4, 2009

Andrew Richardson wrote:

I believe that the better option now, is an annuity online, because with the financial crisis, you don't know when to stay in bankruptcy, so, the life insurance annuity is for to help in manage your money, you stay relaxed and can enjoy your life.

5:04 pm August 4, 2009

Quill Nomen wrote:

Just a silly thought, but has anyone looked at the impact the Cash for Clunkers will have on the metals markets?

7:26 pm August 4, 2009

slowleftarm wrote:

Only Harold Chorney's comments are worth reading, the rest is just fools who refuse to acknowledge anything but doom and gloom.

7:43 pm August 4, 2009

RogerB34 wrote:

Harold C - good summary of the past.
Not a thing about GDP 2009 and 2010.
"appears to be on the mend" after all of your data?
Appears to be or appears not to be, that is the question.

9:55 pm August 4, 2009

John wrote:

So called "jobless recovery" is an artifical effect of government stimulus programs. Individual Americans can feel the reality of the economy.

10:25 pm August 4, 2009

DarkStar wrote:

Historically economists, and others, have underestimated the force and strength of the initial recovery. This time will be no different. If you must ready yourself for anything...think of this: every one of the G8 injected fiscal and monetary stimulus into the world economy to the tune of trillions of dollars. Trillions. Read it again. Those of you versed in economics should know of the vaunted multiplier effect of these stimuli. Would 3rd & 4th quarter U.S. GDP be 2.5%.....3%? How about 6%? Now if you think I'm on to something..........then how much is the market discounted right now?

10:46 pm August 4, 2009

Keynsian nonsense wrote:

Economies grow through increases in productivity not because you print money. Think about what Dark Star is saying about the multiplier effect...in essense you can just print money and by giving it to organizations or individuals to "spend" you get economic growth. sorry but it doesn't work this way...you only get bubbles, inflation and maleinvestments which will need to be liquidated (something you Keynsians just don't want to admit)....The stimulus won't work...because it doesn't increase productivity...

As for GDP---more Keynisan nonsense...think about it, if you have your "central bank" print money out of thin air and "give it to the govt" (monetizing the debt)...you are NOT creating any wealth...just stealing from the hard work of savers and future generations...yet by doing this GDP goes up...what a totally irrelevant metric...

Please pick up the "Road to Serfdom"...you might understand how economies actually work.

I really expect a little better quality of blogs on this site..idiotic statements from Statists.

7:54 am August 5, 2009

Craig wrote:

Your missing the point, this a time, when we realize what utter stupidity that our economy depended on consumer spending, it is rather self-destructive.

What we do need to go back to doing, is creating great small businesses that provide outstanding products and services, that is how we win our economy back, and get out of debt.

7:57 am August 5, 2009

Craig wrote:

President Ronald Reagan, said it best...."Government isn't the solution of our problems, it's the cause"

And everytime our govt, put's it's finger into private business pie, guess what happens? Govt ends up controlling, owning or destroying that industry, or all above, and how does that help our economy?

Maybe the real point, is that the plan is to destroy our economy, and make us dependent on the government for our daily handouts...

8:29 am August 5, 2009

Lawrence wrote:

Yosemite Sam has a great message for the 'Bama Man and his administration: "Back off, Jackass!"

11:40 am August 6, 2009

T Dubya B wrote:

@ Craig

Do you know the logical conclusion of the Reagan quote? The end of the legal fiction known as the corporation. The corporation only exists because the government has created the legal framework for its existance in the legal system. Want government out of the economy? Then make living breathing human beings responsible for all economic activity. And we all that ain't gonna happen. So, some government involvement will always be necessary. It is just a matter fo degree.

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